When buyers complete a transaction they often look to us to help them become sellers. When a Hedge Fund or banks acquires a tape often they have thousands of homes and land in various states of development to sell or move through.
Remcor, my firm offers the new seller (was the 1st tier buyer) a plan for breaking up the properties in to smaller blocks and alternative models.
Condition of Package dictates the Exit Strategies
The exit strategies are limited by the class of the product. You will hear sellers and buyers asking about the rating of the properties. The ratings are based on the quality of the homes, this is based on location and condition. Typical ratings are; A = Good Location and Very good condition, B = Good location and Fair condition, C= Poor location and Poor condition, some people do use a D = very Poor location and Trashed throughout.
The Typical way Out!
These sellers typically create smaller blocks of properties in the 100 to 500 home range that are marketed at a price that offers the seller the ability to recover the investment capital and profit. This strategy works well in the first two phases of the bulk sales process. Some investors have a long term workout plan, but today most investors are in the former category. The condition (A or B) of package provides a fast path to cash minus costs. Everybody wants the cash now!
The Alternative way!
When a seller has 3 thousand homes to sell the seller has a real challenge. Now this problem can be complicated by the condition of the homes. A viable path to cash is possible via a trade. Recently, Remcor helped a bank with a package that was loaded with builder inventory that was in various states of completion and some was vandalized. This bank traded the properties for performing properties by discounting their B,C,D stuff in exchange for commercial triple net properties. The Bank got the liabilities off it's balance sheets and added assets which improved the Banks discount borrowing rate with the FED. The Bank in one transaction lost some money but was able to show the FDIC auditors later that year the improvement in thier financials and was rewarded for fast action.
Friday, February 27, 2009
The Bulk market is Florida is growing!
It appears that even in states with very high NOD and Foreclosure rates there are still clusters of opportunities for the Fourth Tier.
The Fourth is the final liquidation step for properties that are sold off in massive tranches of 10,000 homes in a tier one sale . If you want to know about the various levels or tiers look in the blog here for more details.
Remember that in the final two tiers of the Bulk REO sales process the seller typically are looking for cash and a smart seller will look for a trade too.
What is a trade? I will cover that later this week! Check out the video about a small part of Florida that is still selling even new homes and should be good new for all to end the week!
The Bulk REO game is happening Everywhere
Here is a link to a video from Ky Grace on the attempts in his area to sell off in one group a large number of condos in one project.
Please note this is not a bulk sale in the sense we typically discuss here but a first round attempt to aggregate a sale!
Thursday, February 26, 2009
The Intermediary game intro
Every day I get calls from intermediaries looking to buy or sell and they each have the same problems. Buyers want to talk to sellers direct without an intermediary. This has been and continues to be the greatest problem. Intermediaries that are one step away from either the buyer or the seller have a chance of success.
Often I get calls from an intermediary that has a good sounding package but they have a chain of three to ten other intermediaries that are part of the package. These types of arrangements are “Doomed” to fail.
You must position your company to connect buyers directly to sellers or work with a firm like Remcor. Now this presents many challenges and the first is to work with in the field and get paid in an escrow in an escrow state you often have to be a real estate licensee. Not always and you should seek legal advice regarding your states rules. This is further complicated by the fact the often the package is a “Nation wide” package. Remember I am only talking about REO foreclosed properties that have a perfected title.
Often I get calls from an intermediary that has a good sounding package but they have a chain of three to ten other intermediaries that are part of the package. These types of arrangements are “Doomed” to fail.
You must position your company to connect buyers directly to sellers or work with a firm like Remcor. Now this presents many challenges and the first is to work with in the field and get paid in an escrow in an escrow state you often have to be a real estate licensee. Not always and you should seek legal advice regarding your states rules. This is further complicated by the fact the often the package is a “Nation wide” package. Remember I am only talking about REO foreclosed properties that have a perfected title.
Who Am I
In November of 2007 I wrote a business plan and submitted to the president and she agreed to pursue the plan. Fifteen month later we have 4 full time people working in the REMCOR OREO program. We have closed deals with private parties and banks and I would love to say I can tell you all about them, but the first thing you have to contend with in this industry field is the Non-Disclosure Agreement or NDA as it is commonly know.
The first rule of success is to know the landscape and to figure out where you can play and make money. Here is my list of the opportunity spaces divided by segments.
First Tier
Sellers of first tier bulk product sell in blocks of 1 to 5 billion, that is not a mis-print. There are four sources of product:
1) Fannie Mae and Freddie Mac
2) FDIC
3) Private Sellers
4) Financial Institutions
Second Tier
The sellers in this category are selling divided first tier packages in blocks of 500 million to 1 billion plus lots. The typical sellers are:
1) Hedge Funds
2) Private Equity Groups
3) Banks
4) Private parties
Third Tier
This group of sellers is again sub-dividing Second tier packages that offer are priced in 10o to 250 million range. The typical sellers look identical to the Second tier. The pricing in this range often the higher and the terms can be very diverse based on the type of organization.
The first rule of success is to know the landscape and to figure out where you can play and make money. Here is my list of the opportunity spaces divided by segments.
First Tier
Sellers of first tier bulk product sell in blocks of 1 to 5 billion, that is not a mis-print. There are four sources of product:
1) Fannie Mae and Freddie Mac
2) FDIC
3) Private Sellers
4) Financial Institutions
Second Tier
The sellers in this category are selling divided first tier packages in blocks of 500 million to 1 billion plus lots. The typical sellers are:
1) Hedge Funds
2) Private Equity Groups
3) Banks
4) Private parties
Third Tier
This group of sellers is again sub-dividing Second tier packages that offer are priced in 10o to 250 million range. The typical sellers look identical to the Second tier. The pricing in this range often the higher and the terms can be very diverse based on the type of organization.
Tracking This Changing Field
Welcome!
Like many of you I have been tracking REO Bulk tape sales for over a year. I am sure many of you have read other blogs such as, Andrew Clemente - Mortgages Made Easy, Inc. He was one of the first blogs I read but it is very light on details.
My goal is try and document the trends and processes. The REO Bulk Sales field is overrun with crazy chains of intermediaries, phantom sellers and buyers with wacky issues.
Here is a short example: Last week I talked to a Realtor in San Diego that had a 20 million plus REO Bulk deal fall out of escrow. Why you ask? This bank sold 80% of the inventory even though they had and escrow open and during the due diligence period after the Buyer had completed a review of the named properties on the tape. Oops, sorry buyer, of course they offered to provide replacements but the buyer had already spent 12 thousand dollars doing a Buyer Price Opinion or a BPO.
Every day I see one of more of these stories and this has been the norm. Many of you want to close a deal and get paid and that is why I am writing this blog.Our firm is located in Northern Nevada and unlike the Southern half of the state we continue to be in fair shape here in the Northern Nevada.
Like many of you I have been tracking REO Bulk tape sales for over a year. I am sure many of you have read other blogs such as, Andrew Clemente - Mortgages Made Easy, Inc. He was one of the first blogs I read but it is very light on details.
My goal is try and document the trends and processes. The REO Bulk Sales field is overrun with crazy chains of intermediaries, phantom sellers and buyers with wacky issues.
Here is a short example: Last week I talked to a Realtor in San Diego that had a 20 million plus REO Bulk deal fall out of escrow. Why you ask? This bank sold 80% of the inventory even though they had and escrow open and during the due diligence period after the Buyer had completed a review of the named properties on the tape. Oops, sorry buyer, of course they offered to provide replacements but the buyer had already spent 12 thousand dollars doing a Buyer Price Opinion or a BPO.
Every day I see one of more of these stories and this has been the norm. Many of you want to close a deal and get paid and that is why I am writing this blog.Our firm is located in Northern Nevada and unlike the Southern half of the state we continue to be in fair shape here in the Northern Nevada.
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